Associated Press Stocks surge on plan to ease European debt crunch

Stocks surge on global effort to ease European debt crunch; Dow industrials jump 405 points

NEW YORK (AP) -- Stocks rocketed to their biggest gain in a year and bond prices fell Monday after a nearly $1 trillion plan to contain Europe's debt crisis reassured investors.

The Dow Jones industrial average rose about 405 points to its biggest advance since March 2009. Broader U.S. indexes outpaced the Dow's 3.9 percent rise. Gains in several European markets topped 9 percent.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.54 percent from 3.43 percent late Friday. The drop in demand for safety holdings like Treasurys signaled that investors are less afraid that Europe's debt problems will endanger a global recovery.

The European Union and the International Monetary Fund agreed to create a nearly $1 trillion rescue fund to support European nations burdened by heavy debt. Analysts caution that countries like Greece will still need to make painful spending cuts in the coming years and that the debt problems won't disappear any time soon. Nonetheless, the size of Europe's response was far greater than most analysts had expected, and signaled that policymakers are ready to take significant measures to shore up the euro and keep Europe's debt woes from spreading.

"The market is breathing a huge sigh of relief that the EU has taken aggressive steps," said Alan Gayle, senior investment strategist at RidgeWorth Investments in Richmond, Va.

Investors drew reassurance after the Federal Reserve and other central banks stepped up with financial support to corral what analysts warned was a growing financial crisis.

The Fed restarted a program from 2008 to ship dollars overseas through the foreign central banks. Those central banks can then lend the dollars out to banks in their home countries. The Bank of England, the European Central Bank, the Bank of Canada, the Swiss National Bank and the Bank of Japan are also involved in the dollar-swap effort.

The advance in U.S. stocks was broad. Bank of America Corp., Caterpillar Inc. and General Electric Co. led the Dow with gains of more than 6 percent. All 30 stocks that make up the Dow ended higher for the first time since Nov. 5. more...